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Price-free isn't cost-free

December 16, 2009

If only the health care system were as transparent as the market for yoga classes. Every medical procedure would have a clear and incontrovertible price tag, no patient would be banned from consulting the doctor of his choice (as long as he’s willing and able to pay), and risk would be incorporated rationally into premium prices. Or so goes the argument in this lively National Review free-market tractate. As Kevin Williamson puts it, “A good rule of thumb: Fear the man who says he will make things rational by ignoring reality--and ignoring prices is ignoring reality.” While his treatise only touches on education, and he may be overly idealistic about the feasibility of putting a price tag on the wares of private or public bureaucracies, the general point about transparency is certainly worthwhile. Per-pupil spending in education continues to rise, yet it’s difficult to know exactly where all the money is going. Luckily, a handful of analysts are doing some difficult and overdue data-mining: most notably, the Finance, Spending, and Productivity Project at the University of Washington’s Center for Reinventing Public Education. They’ve put price tags on art courses vs. math courses (hint: the latter cost a lot less), and on sports vs. extended school hours. Other researchers have found that consumers (parents) actually modify their opinions significantly when they have access to the price (salary) of teachers. And let’s be honest, it’s rare that government bureaucracies take a close-enough look at their bottom lines when they aren’t spending their own money.